E. Bon Holdings' (HKG:599) Upcoming Dividend Will Be Larger Than Last Year's

The board of E. Bon Holdings Limited (HKG:599) has announced that it will be paying its dividend of HK$0.01 on the 12th of October, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 5.3% is only a modest boost to shareholder returns.

View our latest analysis for E. Bon Holdings

E. Bon Holdings' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before this announcement, E. Bon Holdings was paying out 76% of earnings, but a comparatively small 18% of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 22.4% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 76% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of HK$0.03 in 2012 to the most recent total annual payment of HK$0.02. This works out to be a decline of approximately 4.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though E. Bon Holdings' EPS has declined at around 22% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On E. Bon Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for E. Bon Holdings you should be aware of, and 1 of them is concerning. Is E. Bon Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.